Loading...
Tax News
Legislative Actions
The PATH Act of 2015 makes the 100% QSBS gain exclusion permanent
The PATH Act of 2015 makes the 100% QSBS gain exclusion permanent
Protecting Americans from Tax Hikes (PATH) Act of 2015 was just signed by the President and is officially the law. The Act retroactively increases the Sec. 1202 QSBS gain exclusion for stock acquired in 2015 and prospectively makes the 100% exclusion permanent. Before the enactment of the PATH, only stock acquired before December 31st 2014 qualified for the 100% exclusion, thus, leaving out purchases made during 2015.  Under the Sec. 1202 QSBS rules, the gain eligible for exclusion could be as high as $10 million. Any gain above that amount is taxed at a maximum rate of 28 percent....
December 22, 2015 read more
Repeal of TEFRA and Electing Large Partnership Rules
Repeal of TEFRA and Electing Large Partnership Rules
The Bipartisan Budget Act of 2015 (H.R. 1314) was just signed by President Obama. Basically the law repeals the so-called TEFRA and “electing large partnership” audit rules and replaces them with a new unified audit and assessment regime. TEFRA language is prevalent in every investment fund agreement. Generally you will see it in the tax matters partner section. The language addresses the rights and obligations of the TMP and the investors in case of an audit. Sometimes a fund would not be covered under TEFRA if it has less than 100 partners, but in most instances it would be...
November 04, 2015 read more
NEWT Act Reintroduced
NEWT Act Reintroduced
For those who keep up with the net investment income tax (NIIT) and the S-corporation planning touted by many practitioners as a solution for minimizing both NIIT and employment tax, here is a fresh news to keep in mind.  The Narrowing Exceptions for Withholding Taxes Act of 2013, or so called NEWT Act (purportedly named after former House Speaker Newt Gingrich) was reintroduced in the House this January 22 by Charles Rangel.  This Bill is not new. It was also introduced in the 112th Congress and even prior to that with the American Jobs and Closing Tax Loopholes Act of 2010 (Sec. 413 of...
February 01, 2013 read more
Beware of the PTP Rules: Who Ends up Liable if a Secondary Transfer Triggers Section 7704?
Beware of the PTP Rules: Who Ends up Liable if a Secondary Transfer Triggers Section 7704?
Private equity funds often have lock up periods that prevent limited partners from transferring their interest. However, these periods eventually expire and limited partners who want to exit the fund early have the option of disposing their interest on the secondary market.  This option is often conditioned on providing a legal opinion of counsel or an LP certification that the transfer would not cause the fund to be treated as a “publicly traded partnership” under Section 7704 of the Code. If the fund is treated as a “publicly traded partnership” there could be negative tax...
April 30, 2012 read more
Carried Interest Proposal Blocked in the Senate Yet Again
Carried Interest Proposal Blocked in the Senate Yet Again
This will be a short post. Recently I mentioned on this blog that the Carried Interest legislation is resurfacing again courtesy of Obama’s efforts and the American Jobs Act of 2011. In my post I reasoned that, well, this time the effort may have some legs considering the economic and political climate in the country. Oh, was I wrong!  Contrary to my guess, and making my guess look that sillier, the Senate shut down the bill yesterday in a pretty uniform fashion with all Republicans voting against opening a debate. Democrats are disappointed of course, and if you judge by the post vote...
October 12, 2011 read more
Proposals to Tax Carried Interest at Ordinary Rates are Back
Proposals to Tax Carried Interest at Ordinary Rates are Back
It seems that the efforts to tax investment fund managers’ performance compensation at ordinary income rates had subsided for a long time. Those readers that have followed the issue know that these efforts have been largely unsuccessful since the early inception of the first Carried Interest bill by Senator Levin in year 2007. Now, the Carried Interest proposal resurfaces yet again in the form of a revenue raiser in another Obama favored legislation titled the “American Jobs Act of 2011” (S.1549; H.R.2911). While there are some substantive differences from prior installments, the...
September 26, 2011 read more
Pete Stark Reintroduces Last Year's Currency Tax Bill
Pete Stark Reintroduces Last Year's Currency Tax Bill
For those who do not remember, last year Pete Stark, a D- Cal Representative introduced H.R. 5783, the Investing in Our Future Act of 2010. That bill basically provided that currency transactions will be subject to a 0.005 percent tax on the value of the currency acquired in the transaction.  Last year this Bill did not go anywhere.  That did not stop Mr. Stark from reintroducing the Bill in the 112th Congress.  It doesn’t seem that much has changed from the previous installment.  The Bill, if it ever passes, could put a significant tax strain on hedge funds and private equity funds...
March 08, 2011 read more
Obama Proposes to Make Small Business Stock Exclusion Permanent
Obama Proposes to Make Small Business Stock Exclusion Permanent
The Obama administration announced on January 31, 2011 that the President's 2012 budget plan will include a proposal to make permanent the 100% exclusion from tax on capital gains from the sale or exchange of qualified small business stock.   IRC Section 1202(a)(4), added by The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which provides for the 100% exclusion, currently applies only to qualified small business stock issued after Dec. 31, 2010, and before Jan. 1, 2012 (IRC Section 1202 provides for a 50% exclusion on capital gains with respect to...
February 02, 2011 read more
Proposed Legislation - Credit for Investments in Small Technology Innovation Companies
Proposed Legislation - Credit for Investments in Small Technology Innovation Companies
Few weeks ago Rep. Rush D. Holt, D-N.J introduced H.R. 133, the Creating Jobs From Innovative Small Businesses Act of 2011.  If this legislation passes, which should not come as a surprise considering Congress's earnest efforts to jumpstart the economy, it would offer an income tax credit of up to $100,000 for investments in small technology innovation companies. The credit will be part of the general business credit and will come as newly enacted Section 45S. The credit will be afforded for qualified equity investments which includes original issue of stock or capital interest in a...
January 24, 2011 read more
Treaty Override Provision Dropped from 9/11 Bill
Treaty Override Provision Dropped from 9/11 Bill
New York Senators Charles Schumer (D-N.Y.) and Kirsten Gillibrand (D-N.Y.) on December 21, 2010, announced the removal of a controversial provision from H.R. 847, the James Zadroga 9/11 Health and Compensation Act of 2010, which would have denied treaty benefits for certain deductible related-party payments. Under the provision, a foreign company operating in a treaty jurisdiction would be precluded from claiming treaty benefits with respect to deductible payments received from a related U.S. company if the foreign company is a subsidiary of a corporation based in a third country...
December 22, 2010 read more
Congress Extends Bush Tax-Cuts
Congress Extends Bush Tax-Cuts
After a prolonged and highly publicized debate between Democrats and Republicans, on Friday December 17th the President signed The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  The law is colloquially known as the Bush Tax-Cuts Extender.  Needless to say, the passage of this law was eagerly anticipated by both limited partners and managers of all sorts of funds. The two key provisions that impact funds and their partners are the 2 year extension of the 15% rate for qualified dividends and the 15% rate for long term capital gains. This law, in...
December 18, 2010 read more
view more